January 04, 2019

On December 13, 2018, John McKay, the Member of Parliament for Scarborough-Guildwood, introduced private member's bill, Bill C-423: Modern Slavery Act (the "Bill"), which aims to implement Canada’s international commitment to fight against modern slavery. If the Bill passes through the House of Commons and the Senate, then the Bill will require certain entities to publicly report on the measures the entities have taken to prevent and reduce the risk that forced labour or child labour is used in their business and any step in its supply chain.

There is no universal definition of modern slavery; however, the term is often used to describe child labour, forced labour, human trafficking, and other situations involving the exploitation of humans. Internationally, jurisdictions have started to introduce and implement legislation to address modern slavery practices in the supply chains of consumer products sold in the country, including in the United Kingdom, Australia, and certain jurisdictions within the United States.

Below we provide an overview of the Bill and the lessons Canada can learn from the United Kingdom experience in enacting similar legislation. We conclude by suggesting next steps businesses can take in response to the Bill.

Overview of the Bill

The Bill seeks to address two forms of modern slavery: child labour and forced labour. The Bill defines:

Child labour as labour or service provided, or offered to be provided, in Canada by children under circumstances that are contrary to the laws applicable in Canada or provided or offered outside Canada under circumstances that, if provided or offered in Canada, would be contrary to the laws applicable in Canada.

Forced labour as labour or service provided, or offered to be provided, by a person under circumstances that could reasonably be expected to cause the person to believe that their safety or the safety of a person known to them would be threatened if they failed to provide, or offer to provide, the labour or service.

The Bill applies to any entity that manufactures, produces, grows, extracts, processes or sells goods in Canada or elsewhere; any entity that imports into Canada goods manufactured, produced, grown, extracted or processed outside of Canada; or any entity that controls an entity described above. An entity is defined as a corporation or a trust, partnership or other unincorporated organization that:

(a) is listed on a stock exchange in Canada;

(b) has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years:

(i) it has at least $20 million in assets,

(ii) it has generated at least $40 million in revenue,

(iii) it employs an average of at least 250 employees; or

(c) is prescribed by regulations.

This definition is the same definition of an entity that appears in the Extractive Sector Transparency Measures Act.

The Bill includes an inspection regime and proposes to give the Minister the power to require an entity to provide certain information, such as information about:

the entity's structure and the goods that it manufactures, produces, grows, extracts or processes in Canada or imports into Canada;

the entity's policies in relation to forced labour and child labour;

the entity's activities that carry a risk of forced labour or child labour being used and the steps the entity has taken to assess and manage that risk;

any measures taken by the entity to remediate any forced labour or child labour; and

the training provided by the entity to its employees regarding forced labour and child labour.

The Bill would amend the Customs Tariff to allow for a prohibition of goods manufactured or produced wholly or in part by forced labour or child labour. Entities that fail to comply with certain provisions under the Bill, including the reporting provisions, would be guilty of an offence punishable on summary conviction and liable to pay a fine of up to $250,000.

The Bill as drafted states that the Modern Slavery Act will come into force on January 1, 2020.

The UK Modern Slavery Act

The UK Modern Slavery Act 2015 (the "UK Act") received Royal Assent on March 26, 2015. The UK Act consolidates current offences relating to trafficking and slavery. It also creates two new civil orders to prevent modern slavery; establishes an Anti-Slavery Commissioner; and makes provision for the protection of modern slavery victims.

Like Bill C-423, the UK Act includes a provision on the transparency of supply chains, by which it imposes reporting obligations on certain businesses, including the requirement that such businesses produce a statement setting out the steps they have taken to ensure there is no modern slavery in their own business and their supply chains. The UK government has also published a "Practical Guide" to aid businesses in complying with the reporting obligations under the UK Act. The UK Act creates penalties for the commission of slavery-related offences, and states that the Secretary of State may enforce the reporting requirements by way of civil proceedings for an injunction or, in Scotland, specific performance of a statutory duty.

However, three years after the coming into force of the UK Act, there have been criticisms about its effectiveness, including that enforcement of the reporting requirements has been weak. At a meeting of the UK Public Accounts Committee in 2018, the Home Office confirmed that it does not compile a list of companies that should make a declaration of transparency in their supply chains, does not have a list of those that have done so and, importantly, does not maintain the database.

In addition, the UK National Audit Office published a report in December 2017 examining the Home Office's progress in reducing modern slavery. It found that the Department had established good foundations, but that administrative problems remained. These included a complex referrals process, inconsistent quality of data, and a weak understanding of how much victim support services would cost. In May 2018, the inaugural Anti-Slavery Commissioner, Kevin Hyland, resigned citing government interference in his role.

The Australian Modern Slavery Act

On December 10, 2018, Australia enacted the Modern Slavery Act (the "Australian Act"), which came into force on January 1, 2019. The Australian Act imposes a similar reporting requirement to that of the UK Act. It requires certain large businesses and other entities in Australia to make annual public reports on their actions to address modern slavery risks in their operations and supply chains. Entities below a certain revenue threshold may volunteer to comply with the reporting requirements. The reports will be publicly available on a central repository.

The Australian Act does not impose a penalty for failing to file a statement or for filing an incomplete statement. This aspect of the legislation, among others, will be reviewed three years after the Australian Act commences to determine if the imposition of penalties is necessary or desirable.

Concluding Thoughts

Legislation addressing modern slavery is a developing area of law. Governments, citizens, and companies' growing and expanding focus on corporate social responsibility has placed the conditions under which consumer goods are produced and services provided under scrutiny.

Canada’s legislative and policy efforts to ensure companies that have a nexus to Canada are not involved with any human rights abuses, including the Office of the Extractive Sector Corporate Social Responsibility and the Canadian Ombudsman for Responsible Enterprise, have had mixed success and reception. The proponent argues the Bill is a response to international efforts to curb modern slavery and implement the recommendations made by various non-governmental organizations.

Regardless of whether the Bill is passed, as a matter of corporate citizenship and reputation management, entities involved in the supply chain of goods, including in the higher risk goods such as electronics and textile, should ensure they have undertaken adequate due diligence on those involved in their supply chain and the practices implemented by these entities.

Bill C-423, having recently received First Reading in the House of Commons on December 13, 2018, will need to go through second and third readings in the House of Commons, as well as first, second, and third readings in the Senate, and receive Royal Assent, in order to become law. Readers are cautioned that the path to law is typically difficult for private member's bills.